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- Addressed

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- Partially Addressed

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- Not Addressed

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- Consolidated or Other

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- Pending

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- Closed-Partially Addressed

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- Closed-Not Addressed

Year Identified: 2019

Area Number: 24

Area Type: Cost Savings & Revenue Enhancement

Action:

The Administrator of the Centers for Medicare and Medicaid Services (CMS) should consider and take steps to mitigate the program risks that are not measured in the Payment Error Rate Measurement (PERM), such as overpayments and unallowable costs; such an effort could include actions such as revising the PERM methodology or focusing additional audit resources on managed care.

Progress:

In October 2018, CMS reported that it was developing a plan to address GAO’s May 2018 recommendation. It reported that it continues to develop educational strategies (such as a course on managed care offered by CMS' Medicaid Integrity Institute) and oversight and audit strategies related to managed care. As of December 2019, CMS reported that it has 188 audits and investigations open in 10 states related to Medicaid managed care.

In addition, the agency reported that there were seven managed care reviews in 2019 and in 2020, the agency plans to conduct an additional 10 reviews. CMS is also finalizing its audit with California on the medical loss ratio examination. Further, CMS stated that it continues to develop guidance for states and managed care plans on managed care delivery and oversight to develop program integrity capacity and reduce program risks. In particular, CMS’s audits of states’ medical loss ratios and managed care plans have promise to mitigate the program risks that are not measured in the PERM; CMS should report the findings of these audits and expand the number of states included. GAO will continue to monitor CMS's progress to mitigate the managed care program risks not measured in the PERM. Without addressing these key program risks, CMS cannot ensure the integrity of Medicaid managed care programs, which represent more than half of all Medicaid spending.

Action:

The Administrator of the Centers for Medicare and Medicaid Services (CMS) should eliminate impediments to collaborative audits in managed care conducted by audit contractors and states by ensuring that managed care audits are conducted regardless of which entity—the state or the managed care organization—recoups any identified overpayments.

Progress:

CMS agreed with and has taken some steps to address this action, as recommended by GAO in July 2018. In September 2019, CMS reported that in July 2019, CMS met with states and collaborative audit contractors to discuss coordination of managed care audits, including a wide range of challenges with managed care audits. As result of the feedback and recommendations received, CMS is evaluating several process improvements and reiterated that audit contractors will continue to work with states to provide support and assistance in Medicaid managed care, and that Medicaid managed care audits should not be limited by managed care contract language.

Although CMS has communicated to states the need to increase audits in managed care and address identified issues, it is unclear if these actions will remove known impediments to managed care audits or result in an increase in the number of collaborative audits. Implementing this recommendation is important because few audits of Medicaid managed care have been conducted and overpayments can be significant based on the findings from federal and state audits and investigations that have been completed.

Action:

The Administrator of the Centers for Medicare and Medicaid Services (CMS) should require states to report and document the amount of managed care overpayments to providers and how they are accounted for in capitation rate-setting.

Progress:

In March 2019 CMS issued the 2019-2020 Medicaid Managed Care Rate Development Guide for states, which implements GAO’s July 2018 recommendation. The guide requires that rate certification and supporting documentation must describe the development of projected benefit costs included in capitation rates including, among other things, the amount of overpayments to providers and a description of how the state accounted for these overpayments in rate development. States’ are required to use the guide when setting rates for any managed care program subject to federal actuarial soundness requirements during rating periods starting between July 1, 2019 and June 30, 2020.

As a result, CMS is in a better position to ensure that states hold managed care organizations financially accountable for making proper payments and that overpayments do not result in increased capitation payments. GAO believes guides for future rate development time period should also include these provisions.

Action:

The Administrator of the Centers for Medicare and Medicaid Services (CMS) should complete a comprehensive, national risk assessment and take steps, as needed, to assure that resources to oversee expenditures reported by states are adequate and allocated based on areas of highest risk.

Progress:

CMS agreed with GAO’s August 2018 recommendation and has begun taking steps to conduct a comprehensive national risk assessment. As of October 2019, CMS had developed a standard tool to assess risk and staff capacity. The agency indicated that once the assessment is complete, CMS will identify opportunities to increase resources, review the current allocation of financial staff, and determine the appropriate allocation of staff by state.

As of December 2019, however, CMS had not completed a comprehensive risk assessment. Without this assessment, CMS cannot assure that resources are adequate and targeted to the areas of highest risk. GAO will continue to monitor CMS’s actions to complete this action.

Action:

The Administrator of the Centers for Medicare and Medicaid Services (CMS) should revise the sampling methodology for reviewing expenditures for the Medicaid expansion population to better target reviews to areas of high risk.

Progress:

As of December 2019, CMS indicated that it continues to believe the sampling methodology is sufficient and has no plans to revise it, but the agency noted that it recently revised requirements for focused financial management reviews to better target expenditures for the expansion population. According to the agency, these revised requirements are intended to augment the sampling methodology.

Although the changes to the requirements for financial reviews represent an important step in targeting risk, such reviews can be infrequent and take years to complete. Therefore, it is too soon to assess whether these reviews and the current sampling methodology are sufficient in targeting risk. GAO will continue to monitor CMS’s efforts to target this high-risk area with the various tools currently available, including the sampling methodology and financial management reviews.